UPSC General Studies Sample Paper General Studies Sample Paper-6

  • question_answer
    Which one of the following refers to 'disinflation'?

    A)  A simultaneous existence of high rate of inflation and high unemployment in the country

    B)  A process of reversing inflation, but without creating unemployment and reducing output

    C)  A policy of moderating rising prices and also to pull the system out of the depth of depression

    D)  A situation of general depression and widespread unemployment caused by deficiency of effective demand

    Correct Answer: B

    Solution :

    [b] Disinflation is a decrease in the rate of inflation, a slowdown in the rate of increase of the general price level goods and services in a nation's gross domestic product over time. It is the opposite of reflation. Disinflation occurs when the increase in the 'consumer price level' slows dew from the previous period, when the prices were rising. Disinflation is the reduction in the general price level in the economy, but for a very short period of time. Disinflation takes place only when an economy is suffering from recession. If the inflation rate is not very high to start w disinflation can lead to deflation, decreases in the genera price level of goods and services.                        

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